J.P. Morgan: Satellite radio peaking?

DavidB. Wilkerson

SAN FRANCISCO (MarketWatch) -- Shares in Sirius Satellite Radio and XM Satellite Radio were modestly lower Monday after J.P. Morgan said consumer interest in satellite radio may be declining, based on a survey it conducted last month.

Sirius
SIRI, +0.00%
was down 17 cents, or 2.6 percent, at $6.25, while XM
XMSR
shed $1.08, or 3.3 percent, at $31.42 in midday action.

According to J.P. Morgan's survey of more than 1,600 people, taken in December, 35 percent said they had interest in subscribing satellite radio, down from the 43 percent who expressed such an interest in a May poll.

Analyst Barton Crockett called these results "surprising," since Sirius and XM have spent considerable dollars to attract high-profile sports content and radio hosts in recent months. The publicity around these announcements has helped the stocks of both companies -- particularly that of Sirius.

"We believe [the latest poll data] shows that new content exclusives are not expanding the overall market (although they are shifting share to Sirius), that new subscribers are more price-sensitive than early adopters and that new alternative technologies, such as Apple's
AAPL, +0.62%
iPod, may be eroding consumer interest," wrote Crockett in a note to clients.

The main attraction of satellite radio is not personalities or sports, but commercial-free music, the J.P. Morgan analyst said. Some 62 percent of people who said they would be interested in subscribing to satellite radio cited music without commercials as a reason to sign up.

Only 31 percent said unique content was a factor.

Last October, the controversial Howard Stern agreed to a $100 million deal to join the Sirius stable next year, after his contract expires with Viacom's
VIA, +0.49%
Infinity Broadcasting.

Sirius also has a $220 million agreement to broadcast NFL games, while XM's paid $650 million for the rights to 11 years of Major League Baseball broadcasts.

Auto announcements in early 2005 could include XM on more production commitments from Nissan and Toyota, as well as Sirius touting further commitments from Ford, Crockett asserted. Later in the year, possible partnerships with MP3 manufacturers, cell phone makers or other entities could lead to more excitement about the companies, he added.

However, that stream of news will slow down in 2006, Crockett predicts, and absolute net-subscriber growth for the medium should peak not long after Stern jumps to Sirius and production of vehicles with factory-installed satellite radio capability "hits its stride."

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.